The ongoing conflict in the Gulf, sparked by a US-Israeli offensive against Iran, has severely impacted Pakistan’s economy, leading to high inflation and energy shortages. As Iran retaliates by targeting Gulf nations and closing the strategic Strait of Hormuz, Pakistan faces dire consequences that are becoming a question for its survival.
The Iran war, that has more became a wide conflict in the Gulf and Middle East, has entered its second month. The offensive first started on February 28 when United States and Israel launched more than 30 bombs eliminating Supreme Leader Ayatollah Ali Khamenei, several of his key aides and family members. The two nations together has been hitting Iran, attacking its energy infrastructure, military assets, missile production units, civil nuclear and alleged nuclear weapon sites inflicting very heavy damages to the economy of an already struggling nation. Iran in retaliation is leaving no opportunity to hit back, especially targeting Gulf nations including United Arab Emirates (UAE), Saudi Arabia, Kuwait, Bahrain, Qatar among others including Israel to pressure the United States. Not just launching missiles, but Tehran has closed down Strait of Hormuz – a strategic energy trade route in the region, brining world oil and gas trade to a standstill. The closure of Hormuz has affected and disrupted almost every nation due to the uncertainty over availability of energy, but Pakistan seems to be the worst hit nation, economically, without even getting directly involved in the war. Not just the Hormuz, but Islamabad is also rattled that the war is showing no signs of deescalation and a thought of sending its troops to Saudi Arabia, flashing like a nightmare.
From high inflation, scarcity over energy security, and a fear that it may be hit next by Tehran is leading to panic-like situation. More than Israel, Iran or America, it is the Pakistan that is pushing for a possible ceasefire by offering to host a meeting of all the stakeholders, displaying that not Tehran, but it is Islamabad that is more eager for a peace deal. But why Pakistan is more desperate for a ceasefire than the actual nations who are fighting against each other including US, Israel and Iran.
Iran Conflict – A War Pakistan Can’t Survive
Islamabad is disturbed due to a lot of issues like including the current energy crisis that has disrupted supply of oil and gas, energy shortage-related inflation, UAE asking to pay back its $3 billion loans when economy is already struggling, fear to send its troops to fight for Saudi Arabia due to the defence pact, and an imminent fear that Iran may target Islamabad next if indeed it sends its troops or American forces uses its bases to target Tehran for a possible ground raid.
It is because of all these reasons, Pakistan raised a bid for ceasefire and offered to host the stakeholders for peace talks, a move even endorsed by Donald Trump but downplayed and rejected by Tehran.
Closure of Strait of Hormuz is becoming a survival question for Pakistan
The closure of Strait of Hormuz – crucial for a major chunk of world’s energy trade – is taking a toll on Pakistan’s already depreciating economy. The disruption in supply of oil and gas is leading to historic rise in inflation in the country, unbearable hike in petrol-diesel prices, and ultimately affecting affordability of every other commodity related to it.
The inflation has forced Pakistan to ration fuel to its citizens, government machinery, offices and officers, implement partial work from home; closure of educational institutions, increased disruptions in power; shortage of LPG gas affecting local business and other related issues.
The situation is turning for worse prompting Shehbaz Sharif government to hold emergency meetings to consider providing subsidies to government institutions, public services, digging a bigger hole in federal funds.
On Sunday, Shehbaz Sharif held yet another emergency meeting to review progress of the government’s implementation of subsidies on petroleum products, fuel reserves, consumption in the country, as fears are slowly turning into panic.
As per latest information, Petrol is currently priced at PKR 458.4 per litre and PKR 520.35 per litre for HSD.
Residents of Karachi have also expressed strong anger after the government sharply increased fuel prices, pushing petrol to a record PKR 458.40 per litre and diesel to PKR 520.35 per litre, effective April 3.
لاہور: 5 اپریل 2026.
وزیرِ اعظم محمد شہباز شریف نے خطے میں حالیہ کشیدگی کے دوران پیٹرولیم مصنوعات پر حکومت کی جانب سے سبسڈی کے نفاذ پر پیش رفت کے جائزہ اجلاسکی صدارت کی. اجلاس کو سبسڈی کی فراہمی پر پیش رفت سے آگاہ کرنے کے ساتھ ساتھ ملک میں ایندھن کے ذخائر اور کھپت پر بھی بریفنگ… pic.twitter.com/dUJBBSE7ZW
— Prime Minister’s Office (@PakPMO) April 5, 2026
Abu Dhabi Asks Pakistan To Repay Loan – A Worst Nightmare Coming True
According to a news report, Abu Dhabi had sought the immediate return of the funds from Islamabad — approximately USD 3 billion, which were part of external financial support extended in 2019 through the Abu Dhabi Fund for Development to stabilise Pakistan’s balance of payments.
As reported by Dawn, Pakistan is currently under an International Monetary Fund programme that requires it to secure about USD 12.5 billion in rollovers from key partners, including China, Saudi Arabia, and the UAE, to maintain reserve levels and meet external financing needs.
The latest data, as reported by Dawn, places Pakistan’s central bank reserves at approximately USD 16.3 billion. A repayment of around USD 3 billion could reduce reserves by nearly 18 per cent, significantly weakening the country’s external buffer and import cover.
Fear of Sending Troops To Saudi Arabia As Per The Defence Pact
Another fear which is taking a toll on Pakistan is the possibility of sending its troops to Saudi Arabia due to a Strategic Mutual Defence Agreement (SMDA) signed between the two nations in Riyadh on September 17, 2025. The pact calls for a mutual defense framework where any aggression against either country will be considered an attack on both.
Now since, Saudi is being hit hard by Iran, and a reality that a mutual defence pact exits with Pakistan, Islamabad is bound to protect its ally. It should either support it via weaponry, Air Defence or attack Iran. But Pakistan is in no position to do either, first it doesn’t have the guts to attack Iran as it knows Tehran will hit it even much harder compared to what it is doing with Gulf nations, and second, it cannot even send the troops because it is already engaged in fighting Afghanistan and Taliban. The situation forces it to pitch for a peace deal or a temporary truce.
Islamabad’s bid for hosting for peace talks is not an expertise or a diplomatic edge but a compulsion that it will have to and pray because it’s survival is at stake.
But Iran In No Mood For Talks, Says ‘Not Interested in Visiting Pakistan’
Given that Pakistan is trying hard to somehow manage a meeting of stakeholders in Islamabad to work out a possible truce deal, Iran has dismissed any possibility of having talks with the United States citing trust issues. Tehran has been saying that it doesn’t want a ceasefire – even though Trump has claimed that they are pleading for a one – and vows to fight till the end, punish the aggressor (America).
The development of Tehran’s refusal to participate in the so-called peace talks is not much of a shocker to the United States or Israel or even Gulf which indeed wants Iran to be punished hard, as it has been for Pakistan because the stakes here are for its survival.